833 F.

2d 1391

George O. NAUGLE, Plaintiff/Appellant,

v.
John J. O'CONNELL, Harris Combs and Paul R. Dean,
Trustees,
United Mine Workers of America Health and
Retirement Fund, Defendants/Appellees.
No. 85-1750.

United States Court of Appeals,

Tenth Circuit.
Nov. 18, 1987.

Karen L. Yablonski-Toll, Law Offices of John W. McKendree, Denver,

Colo., for plaintiff/appellant.
Richard S. Mandelson, Baker & Hostetler, Denver, Colo. (William F.
Hanrahan, Gerald E. Cole, Jr., and Carolyn A. Mensi, Office of Gen.
Counsel, UMWA Health & Retirement Funds, Washington, D.C., with
him on the brief), for defendants/appellees.
Before HOLLOWAY, Chief Judge, ANDERSON, Circuit Judge, and
BRIMMER, * District Judge.
STEPHEN H. ANDERSON, Circuit Judge.

This case comes to us on appeal from district court judgments upholding the
denial to plaintiff/appellant George O. Naugle of pension benefits from the
United Mine Workers of America 1950 Pension Plan ("the Plan"), and ordering
Naugle to restore to the Plan trust $6,902.89 plus interest that the trust had
already paid him. For the reasons set forth below we affirm the judgments of
the district court.

I.
2

To be eligible for Plan pension benefits, the Plan requires an employee to

satisfy any one of three different vesting options. First, an employee may
qualify by being employed in classified service for twenty years with at least
five of those years being signatory service.1 Second, an employee could qualify
with ten years of signatory service so long as at least three of those work years
were after December 31, 1970. Finally, if an employee had ten years of
signatory service, but did not have three years of post-1970 signatory service,
he still could qualify for pension benefits if he had been in the employ of a
signatory employer for those three years, and if he otherwise met the
requirements incorporated in the Plan for counting those years as signatory
service. This appeal involves the conditions of this final vesting option.
3

Naugle's employment history shows that for approximately twelve years prior
to 1957 he worked in the mining industry in positions that were considered
signatory service for purposes of receiving a vested pension benefit under the
Plan. In 1957 Naugle accepted a supervisory position from Kaiser Steel that
was not a classified position. Naugle held this job until October 9, 1970, when
he terminated his employment with Kaiser to become a government mine
inspector. However, this employment with the government lasted only three
months, after which he resumed his employment with Kaiser on February 1,
1971. Naugle remained in this supervisory employment until he took sick leave
and thereafter disability retirement, beginning on April 13, 1975.

On November 27, 1979, Naugle applied for pension benefits from the Plan.
The application form used by the Plan only required him to indicate his
employment within the coal industry. Accordingly, Naugle did not indicate on
the form his interim employment with the federal government. The Plan
trustees were nonetheless informed in a letter by Kaiser that Naugle quit Kaiser
Steel in October of 1970 and was rehired in February of 1971. However, the
trustees apparently overlooked that information and granted him benefits.

Pursuant to an unsuccessful appeal by Naugle for an increased benefit, the

trustees noticed that he quit his employment in October of 1970. After a
subsequent investigation, they determined that his government employment
disqualified him from receiving pension benefits under the third vesting option
of the Plan. Accordingly, they informed Naugle that he would receive no
further benefits and that they would seek the return of the funds already paid
him. He appealed to the trustees and when the appeal was denied sought
review in the district court. The district court upheld the trustees'
determinations in all particulars and granted them restitution of the funds paid
Naugle.

On appeal Naugle contends first that the denial of his pension benefits is

erroneous because it violates the provisions of the Employee Retirement

Income Security Act ("ERISA"), 29 U.S.C.A. Secs. 1001 to 1461 (West 1982 &
Supp.1987). Moreover, he contends that the denial of benefits to him is
inconsistent with the Plan itself. He also argues that summary judgment was
improper because there was a remaining question of fact as to whether the
denial of his pension benefits was arbitrary and capricious. Finally, Naugle
argues that he should not have to return the amount paid by the Plan because
the payment was based on a mistake of law, not of fact, and that, accordingly,
he need not return the money even if it was mistakenly paid.
II.
7

Judicial review of a trustees' decision to deny benefits is limited to a

determination of whether the decision is arbitrary or capricious.2 A decision is
neither arbitrary nor capricious if it is based on substantial evidence and is not
the result of a mistake of law. See Carter v. Central States, Southeast and
Southwest Areas Pension Plan, 656 F.2d 575, 576 (10th Cir.1981); Peckham v.
Bd. of Trustees of Int'l. Bhd. of Painters, 653 F.2d 424, 426 (10th Cir.1981).
See also Murn v. United Mine Workers of America 1950 Pension Trust, 718
F.2d 359, 361 (10th Cir.1983); Mestas v. Huge, 585 F.2d 450, 453 (10th
Cir.1978). Naugle argues that the denial of a pension benefit to him is
erroneous because it is inconsistent with ERISA. We disagree.

In order to protect employees, ERISA mandates certain minimum vesting

requirements that all pension plans must meet. Pension plans satisfy ERISA
requirements if any one of three statutory options for minimum vesting is met.
Two of these options are relevant to this appeal. The first option requires a plan
to provide that an employee with "at least 10 years of service ha[ve] a
nonforfeitable right to 100 percent of his accrued benefit derived from
employer contributions." 29 U.S.C.A. Sec. 1053(a)(2)(A) (West 1987).3 This is
the option that the trustees claim the Plan satisfies. The second option requires
a plan to provide that "an employee who has completed at least 5 years of
service ha[ve] a nonforfeitable right to a percentage of his accrued benefit
derived from employer contributions." 29 U.S.C.A. Sec. 1053(a)(2)(B) (West
Supp.1987).4 Naugle argues that the Plan does not comply with the first option
and must be interpreted to come within the provisions of the second, thus
granting Naugle a percentage benefit for the more than five years of service that
he performed.5 As evidence that the Plan does not comply with the first option
Naugle notes that the Plan pays a full pension benefit for participants with more
than 20 years of service but only pays a percentage of the full pension benefit
for those participants employed more than ten but less than twenty years.
Naugle argues that if the first alternative statutory schedule actually had been

adopted, as the trustees claim, "there would be no percentage pension benefit

for an applicant with more than ten (10) but less than twenty (20) years of
signatory service." Appellant's Brief at 6 n. 7.
9

Naugle apparently misreads the first ERISA alternative. A correct reading

shows that it requires only that an employee with "at least 10 years of service
ha[ve] a nonforfeitable right to 100 percent of his accrued benefit derived from
employer contributions." 29 U.S.C.A. Sec. 1053(a)(2)(A) (West Supp.1987)
(emphasis added). It does not require that once an employee obtains ten years
of covered service he receive "a full pension benefit." Naugle's reading would
require that an employee with ten years of qualified service receive the same
pension benefits as all other employees who may have worked years longer. As
the district court said in rejecting this argument, "[a]ccrued benefits increase
with each year of service as an employer contributes additional money into the
employee's pension account." R.Vol. II at 352. And, "[t]his increase ... is not
necessarily inconsistent with a participant's right to 100 percent of his or her
accrued benefits derived from employer contributions." Id. The Plan defines a
full pension benefit and requires twenty years of qualified employment to
obtain it. However, it provides for a percentage payment of that full pension
benefit to all employees having at least ten years of qualified service. Naugle
offers no evidence to suggest that this percentage of the full pension benefit is
not "100 percent of his accrued benefit derived from employer contributions."
Accordingly, we reject Naugle's contention that we must construe the Plan
under the second alternative minimum vesting option set out in section Sec.
1053(a)(2)(B).6

10

As a second matter, Naugle argues that the Plan is broader than the ERISA
regulations, and that the trustees erred in construing the Plan according to strict
ERISA provisions. The Plan, however, in determining who is eligible for
pension benefits, incorporates the statutory and regulatory provisions of
ERISA. Accordingly, to determine who is eligible under the Plan it is necessary
to refer to Plan definitions, as well as statutory and regulatory mandates. Thus,
it is not always an easy task to determine who is qualified under the Plan. This
is one of the reasons why the court defers to the judgment of trustees who have
the right to make broad eligibility determinations unless that judgment is
arbitrary or capricious. See Murn, 718 F.2d at 361; Elser v. I.A.M. Nat'l.
Pension Fund, 684 F.2d 648, 654 (9th Cir.1982), cert. denied, 464 U.S. 813,
104 S.Ct. 67, 78 L.Ed.2d 82 (1983); Carter v. Central States, Southeast and
Southwest Areas Pension Plan, 656 F.2d 575, 576 (10th Cir.1981); Peckham v.
Bd. of Trustees, 653 F.2d 424 (10th Cir.1981); Ponce v. Constr. Laborers
Pension Trust, 628 F.2d 537, 542 (9th Cir.1980); Mestas v. Huge, 585 F.2d
450, 453 (10th Cir.1978); Roark v. Lewis, 401 F.2d 425, 429 (D.C.Cir.1968).

11

The Plan provides that an applicant is eligible for pension benefits if he has:

(1) Attained the age of fifty-five (55) years, and

12
13 Either completed twenty (20) years of Credited Service, including the required
(2)
amount of signatory service as set forth in Article IV(C)(4) or completed at least ten
(10) years of signatory service, including at least three (3) years of signatory service
after December 31, 1970.
14

Article II p B of the Plan.

15

At the time of Naugle's retirement and subsequent pension application he was

over fifty-five years of age. But, he had not completed twenty years of
classified service nor did he have three years of signatory service after
December 31, 1970. Thus, in order to qualify for pension benefits, Naugle had
to meet the requirements of Article II p E of the Plan which provides:

16 all purposes of this Article II, if any Participant's signatory service shall be less
For
than the total of his years of employment in the coal industry after May 28, 1946 for
Employers then signatory to the bituminous coal wage agreement then in effect ...,
and if such Participant has at least three years of such employment after December
31, 1970, then such years of employment shall be used for purposes of any eligibility
requirement of minimum signatory service under this Article in place of years of
signatory service.... The provisions of this paragraph shall be interpreted and
construed in accordance with the requirements of ERISA and the regulations issued
thereunder.
17

Article II p E of the Plan.

18

Therefore, under the terms of the Plan, even if an employee does not have
enough post-1970 years of signatory service to qualify for a pension, so long as
he is in the employ of signatory employers and otherwise qualifies under the
requirements and regulations of ERISA, those years are counted as signatory
service for purposes of qualifying for a vested pension benefit. But, ERISA
regulations indicate that not all years of employment for a signatory employer
need be counted for purposes of pension eligibility. They do require trustees to
take into account all covered (classified) service and contiguous noncovered
service with signatory employers.7 That is, the trustees must count towards
pension eligibility all years where an employee either worked in a classified
position or worked for a signatory employer in a position that followed or
preceded classified service. The regulations, however, permit trustees to
disregard service years that are not classified and which do not precede or

follow classified service years for signatory employers.8

19

Naugle quit Kaiser Steel in October of 1970 and accepted employment with the
United States government. It was at this time that his contiguous noncovered
service ended. Even though he returned to Kaiser in February of 1971, the
noncovered service in which he again became employed was no longer
contiguous with his covered service that ended in 1957 because it did not
precede or follow covered service; it followed government employment.9
Since, without this time period, Naugle did not have three qualifying years of
post-1970 service, the trustees denied him further benefits and informed him
that they would seek repayment of the trust amounts already paid to him.

20

Naugle argues that the trustees erred because the provisions of the Plan are
broader than the ERISA regulations that the trustees employed in denying him
a pension. He notes that the provisions of Article II p E of the Plan state that
nonsignatory service employment with signatory employers "shall be used for
purposes of any eligibility requirement of minimum signatory service under this
Article in place of years of signatory service." He thus argues that even if his
service after 1970 was not contiguous with his signatory service it should
nonetheless be considered for purposes of vesting his pension benefit because
the language of the Plan requires it. However, the same paragraph of the Plan
also specifies that the paragraph shall be interpreted and construed in
accordance with the regulations issued under ERISA. In our opinion, it is
reasonable to read this passage as indicating that years of nonsignatory
employment under the Plan shall be taken into consideration for vesting
purposes except to the extent that ERISA and its regulations authorize
otherwise. And, even if we thought that another interpretation were equally
plausible, we could not conclude that such a determination by the trustees was
arbitrary, capricious, based on insubstantial evidence or an error of law. "
[W]here the trustees of a pension fund in setting eligibility standards have
several rational alternatives, and select one and reject the others, there is no
basis for judicial intervention." Murn, 718 F.2d at 361 (quoting Mestas v.
Huge, 585 F.2d 450, 453 (10th Cir.1978)).

21

Naugle next argues that the Plan's provisions allowing the trustees to ignore all
years of qualified service before 1971 unless an employee has three years of
service thereafter are discriminatory in that "the Plan denies pension benefits to
certain employees but would give pension benefits to employees who had
worked a substantially lesser period of time."10 He argues that some rational
nexus must exist between this exclusionary provision and the Plan's purpose.
But, this exclusionary provision as incorporated in the Plan comes directly from
ERISA itself. See 29 U.S.C.A. Sec. 1053(b)(1)(E) (West Supp.1987).

Therefore, the thrust of Naugle's argument is that the Plan trustees cannot
comply with their fiduciary duties under the Plan and at the same time invoke
this exclusionary provision authorized by ERISA. We reject this argument and
note that to the extent that a rational purpose could be required of this ERISA
provision one exists. Congress included this section in ERISA to avoid
imposing on pension plans the heavy cost of providing for retroactive vesting
for employees who had terminated their employment prior to ERISA's passage.
H.R.Rep. No. 807, 93rd Cong., 2nd. Sess., reprinted in 1974 U.S.Code Cong. &
Admin.News 4670, 4687, 4723. To be sure, this legislative line-drawing works
a hardship on Naugle. Like many others, Naugle had the necessary years of
service to qualify for a pension under the Plan absent this exclusionary
provision of ERISA that the Plan incorporated. Unlike many others, he had
terminated his employment in classified service for what turned out to be a
short time. Nonetheless, the legislative purpose of protecting pension funds by
preventing the retroactive vesting of pension benefits is a rational one. And,
where the trustees are adhering to exclusionary provisions authorized by
Congress, it is not for this court to call their action arbitrary.
22

Next, Naugle argues that summary judgment was inappropriate because there
remains a matter of fact as to whether he was arbitrarily denied pension
benefits under the Plan. Naugle claims that he attempted to show such an
arbitrary denial, by requesting discovery that might show that others similarly
situated under the Plan were granted pension benefits whereas he was denied
them. Naugle requested such information in interrogatories to the trustees; the
trustees, however, refused to provide such information because it would have
required them to manually examine over 200,000 individual benefit application
files. On this basis the federal magistrate refused to compel the discovery.

23

We review discovery rulings by magistrates and the district court under an

abuse of discretion standard. See Silkwood v. Kerr-McGee Corp., 563 F.2d
433, 436 (10th Cir.1977); Usery v. Local Union 720, Laborers' Int'l. Union Of
N. Am., 547 F.2d 525, 528 (10th Cir.), cert. denied, 431 U.S. 938, 97 S.Ct.
2649, 53 L.Ed.2d 255 (1977); Newell v. Phillips Petroleum, 144 F.2d 338, 340
(10th Cir.1944). Naugle offers no argument that the magistrate abused his
discretion in refusing to compel discovery. Absent such argument we must
assume, as we do, that the discovery ruling was appropriate. It is Naugle's
responsibility to discover, in an acceptable manner, facts that he deems relevant
to the dispute. He cannot fail to discover such facts and then assert that
summary judgment is inappropriate because it is precluded by facts that he
failed to discover.

24

Because we find that summary judgment was appropriate in this instance and

because we have determined that the trustees' denial of pension benefits was
not arbitrary, capricious or based on a mistake of law, we affirm the district
court's determination that Naugle does not qualify for pension benefits under
the Plan.
III.
25

The final argument raised by Naugle, and the only one he offers to dispute the
trustees' right to restitution, is that erroneous payments based on a mistake of
law need not be restored to the mistaken payor. See Restatement of Restitution
Sec. 45 (1937).11 We, however, determine that the erroneous payment was
based on a mistake of fact, not law, and Naugle concedes that payments based
on a mistake of fact are recoverable by the mistaken payor. See Brief for
Appellant at 19. See also United States v. Carr, 132 U.S. 644, 10 S.Ct. 182, 33
L.Ed. 483 (1890); Sawyer v. Mid-Continent Petroleum Corp., 236 F.2d 518,
521 (10th Cir.1956); Restatement of Restitution, Sec. 20 (1937); Restatement
(Second) of Trusts Sec. 254 (1959).

26

Naugle argues that the trustees were informed that he quit Kaiser Steel in
October 1970 and that he became re-employed in February of 1971. He asserts
that it was the fact that he quit and not that he was otherwise employed which
should have made the difference to the trustees in denying him benefits.
Therefore, since he was nonetheless granted benefits, Naugle asserts that the
payments were the result of a mistake of law. This argument fails. The
employment status of a potential beneficiary is, in this case, a matter of fact.
That the letter from Kaiser Steel indicating that Naugle quit was overlooked by
the trustees in Naugle's initial application does not turn a mistake of fact into a
mistake of law. The trustees may have been negligent in failing to request or
subsequently determine Naugle's complete employment history before initially
granting him benefits, but negligence alone on the part of the payor does not bar
the trustee's right to restitution.12 We have previously noted that "restitution,
based on mistake of fact, will not be denied because of forgetfulness of once
known facts or negligent failure to ascertain the true facts." Sawyer, 236 F.2d
at 521.

27

Because we have determined that the trustees' payment of pension benefits to

Naugle was based on their mistake of fact as to his employment status, we
determine that they are entitled to restitution of the $6,902.89 which they have
already paid to Naugle plus interest on that amount. Accordingly, the district
court's judgments are in all respects AFFIRMED.

Hon. Clarence A. Brimmer, Chief Judge, U.S. District Court, District of

Wyoming, sitting by designation

Classified service is employment in a bargaining-unit, as opposed to a

supervisory, position. Signatory service is a subset of classified service. See
Article IV p B, R.Vol. I at 210. There is an important distinction between
signatory service and employment with a signatory employer. Signatory service
is counted for purposes of plan coverage. Employment with a signatory
employer is not counted unless it otherwise qualifies

If a plan affords trustees the right to make eligibility determinations it is

reviewable by courts under the arbitrary and capricious standard. However, if
the eligibility standards are the subject of collective bargaining and the trustees
are not given "full authority" to determine eligibility requirements, the court
reviews them only to determine whether they comply with federal law. See
United Mine Workers v. Robinson, 455 U.S. 562, 573-74, 102 S.Ct. 1226,
1233, 71 L.Ed.2d 419 (1982). In the instant case, despite the incorporation of
the Plan into the National Bituminous Coal Wage Agreements of 1974, 1978
and 1981, neither party contends that the Plan's eligibility requirements were a
subject of collective bargaining, and both concur that this court may review the
trustees determination under an arbitrary and capricious standard. The Plan
notes that "The Trustees or such other named fiduciaries as may be properly
designated shall have full and final determination as to all issues concerning
eligibility for benefits." See Article VI p A, R.Vol. I at 212

This section of ERISA allows trustees to disregard all years of service "before
January 1, 1971, unless the employee has had at least 3 years of service after
December 31, 1970." 29 U.S.C.A. Sec. 1053(b)(1)(E) (West Supp.1987). Thus,
the trustees were authorized to disregard the approximately twelve years of
credited service which Naugle performed prior to 1957 if Naugle's service after
he quit in 1970 was not attributed to him for purposes of pension eligibility

This second alternative further sets out the required minimum percentages of
employer contributions to which the employee has vested rights based on the
employee's years of service

It nonetheless appears to us that if Naugle's pre-1970 employment is not to be

counted for purposes of pension vesting pursuant to section 1053(b)(1)(E),
Naugle fails to qualify for any benefit under either alternative

At any rate, Naugle's suggested second alternative is also irreconcilable with

the Plan since the Plan incorporates no provision to pay pension benefits to
anyone with less than ten years of qualified service
7

Noncovered service is deemed contiguous if "(1) the noncovered service

precedes or follows covered service and (2) no quit, discharge, or retirement
occurs between such covered service and noncovered service." 29 C.F.R. Sec.
2530.210(c)(3)(iv)(A) (1986)

"In addition to service which may be disregarded under the statutory provisions
... a multiple employer plan may disregard noncontiguous noncovered service."
29 C.F.R. Sec. 2530.210(f)(1) (1986)

It is not arbitrary for the trustees to determine that to "follow" covered service
contiguous service must immediately follow covered service. See Roark v.
Lewis, 401 F.2d 425, 427 (D.C.Cir.1968). Naugle argues that since he quit
between two periods of noncovered service, his pension eligibility should
remain unaffected. His argument is only correct insofar as his pre-1970
employment is concerned. After he quit Kaiser, his post-1970 service was not
contiguous with covered service, although his pre-1970 noncovered service
remained contiguous with covered service. For purposes of the Plan, however,
the lack of contiguous noncovered service after 1970 is fatal

10

We reject Naugle's attempt to characterize this provision as a "forfeiture" of

pension benefits. Rather, the requirement that certain employees have three
years of service after December 31, 1970, was a condition of vesting. If Naugle
had been entitled to a vested pension benefit under the terms of the United
Mine Workers of America Welfare and Retirement Fund of 1950, which
preceded the Plan, the Plan would have honored that entitlement. See Article II
p A of the Plan, R.Vol. I at 207

11

But see, e.g., Morgan Guar. Trust Co. v. American Savings and Loan, 804 F.2d
1487, 1493 (9th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 3214, 96
L.Ed.2d 701 (1987) (New York law allows restitution for mistake of law or
fact); Glover v. Metro. Life Ins. Co., 664 F.2d 1101, 1103 (8th Cir.1981)
(Missouri law allows restitution for mistake of law or fact). ERISA allows
employers who have made a payment to a multiemployer plan under either a
mistake of fact or a law to recover the mistaken payment within six months
"after the plan administrator determines that the contribution was made by such
a mistake." 29 U.S.C.A. Sec. 1103(c)(2)(A)(ii) (1982). See also, Peckham v.
Bd. of Trustees of Int'l. Bhd. of Painters, 719 F.2d 1063 (10th Cir.), modified
and reaff'd, 724 F.2d 100 (1983). How statutory policy might affect different
claims for restitution under ERISA is unclear

12

The Restatement of Restitution Sec. 59 comment a (1937) and the Restatement

(Second) of Trusts Sec. 254 (1959) suggest that the negligence of the wrongful
payor may bar restitution when the payee has relied to his detriment on the
payments. However, Naugle never suggested, either in attempting to defeat the
summary judgment in the district court, or on appeal, that he detrimentally
relied on the pension payments made to him by the trust. Therefore, the
trustees' possible negligence cannot bar restitution